This is part one of a two-part article written collaboratively with Matt HarrisThe investment management industry is ripe for disruption. Whether it be wealth management (advising individual and institutional investors where to allocate their capital) or asset management (creating investment vehicles to manage capital), fees are trending down and client expectations are trending up.

This dynamism has created opportunities for new entrants to quickly take share, albeit often in ways that are catalysts for overall industry profit pool reductions.

So where does that leave market incumbents? Their survival will depend on their ability to successfully navigate the changes underway by effectively leveraging new technology to capture more of the value chain from both new and existing customers and expanding into higher margin segments.

The first disruption: Lowering the price of admission

The entrance of low fee, self-driven trading platforms marked the first disruption in investment management, where compression in trading fees in the industry caused massive profit dislocation.

In 1970 the cost of buying and selling stocks, on average, amounted to more than one percent of transaction value. A retail trade averaged more than $45. When Charles Schwab, Ameritrade and eTrade entered the industry offering significant discounts and digital trading platforms, they sought to win share based on lower fees coupled with a message that the market could be accessible to individuals. Schwab recommended people “talk to Chuck,” and E-Trade presented an actual baby as a pitchman.

Many of the incumbents chose to ignore the discounted offering, in part to avoid cannibalization and in part because they had developed high operating costs, such as large research departments that inhibited them from being able to quickly match or undercut the new entrants. Further, by building new technology to support online client trading, these “new” players were able to capture over $100 billion in eventual market capitalization.

More recently Robin Hood has entered the market offering free trading and in doing so has managed to grow faster than any of its predecessors, while again chipping away at the commission profit pool.

Wealth management: Feeling the heat

In the last decade, the entrance of robo-advisors has called into question whether a similar disruption will take place in wealth management, resulting in an overall reduction in the profit pools of traditional financial institutions. Robos have entered the space with the same strategy of looking to capture market share through lower fees and messages of accessibility.

Additionally, the collective message of these new entrants has been that a) there is no sustainable alpha; b) human service is over-priced; c) fees and rebalanced, risk-managed beta are all that matters; and d) new technology can make for a far more delightful user experience and a lower cost base.

Despite similar concerns around profit cannibalization, some major financial institutions moved to embrace this new technology and leverage the scale of their existing customer base to play in the robo-advice space. Vanguard and Schwab have leapfrogged Wealthfront and Betterment in total assets under management (AUM), and companies like Future Advisor (acquired by Blackrock) and SigFig are providing B2B robo solutions for dozens of large “traditional banks”.

This fast (by corporate standards) adoption of new technology was driven by industry predictions that robo could quickly destroy the traditional wealth management business. That prediction has, in one sense, been overblown. In aggregate, Wealthfront and Betterment manage $25.5 billion in AUM, less than 0.03 percent of the industry; even when you add Schwab and Vanguard’s offerings, it remains less than 0.22 percent of industry assets.

However, traditional players that dismiss the impact of robo advisors will likely do so at their own peril. The real disruption is around fees and fee transparency.

Investors are regularly being told – via Betterment, Wealthfront, Vanguard and the rest of the robos – that active manager performance does not justify high fees. Paying high fees to receive active investment management is for suckers, especially when those active managers may have unrestrained conflicts between their clients’ interests and profitability. Even if that message is aimed at a “new”, younger audience, high-value clients can’t help but hear and absorb it as well.

This of course begs the question, if human advisors are conflicted, expensive and generally fail to add alpha, what is keeping the vast majority of assets in human-driven investment strategies? Why are low fees alone not enough to change investment behavior?

Personal Capital, a robo advisor with approximately 3x the fees of Betterment and Wealthfront, has managed to grow nearly as quickly with an emphasis on combining tech tools with human advisors. Betterment has spent much of its energy in the last two years building out its institutional offering for advisors, a group it once said it would put out of business. A major reason for this is that consumers are looking for not only investment options but also for planning and advice.

A former CEO of one of the largest independent financial advisory firms said that in his experience when people hit 1x their income in savings they become aware of the fact that they need to do something different with their money. When they hit 2-3x their income, they feel a more heightened sense of anxiety about their money management, which, for most, leads to an advisor relationship.

In a survey that Bain Capital Ventures conducted of 556 Americans with $250,000 to $10 million of investable assets, the top financial concern was post-career retirement planning. When asked the most important attributes for selecting a financial advisor, the human attributes of trustworthiness and listening skills ranked highest, whereas fees scored much lower.

These survey results suggest that, even more than total fees, perceptions of conflict and the desire for transparency should concern incumbents that have historically prioritized product and distribution fees over client interests.

A few months ago The New York Times reported a shocking situation where a woman discovered that her mother’s financial advisor from J.P. Morgan Securities had generated $128,000 in fees in one year in her mother’s retirement account, approximately 10 percent of the account’s value. The Department of Labor’s “Fiduciary Rule”, which was supposed to go into effect this year and would have mitigated some financial conflicts such as this, has been indefinitely delayed by the current administration.

The confluence of banks encouraging their advisors to push proprietary products on their clients, coupled with their stingy revenue sharing practices, has caused many of the best financial advisors to open their own advisory practices and become registered investment advisors (RIAs). For the vast majority of these RIAs, who operate under a fiduciary standard for their clients, their focus is holistic and integrated planning and financial management rather than stock picking. The appeal of an independent advisor appears to be resonating with consumers, causing an unprecedented level of firm incorporations and new technology products to serve them.

Despite all of these factors, financial planning and wealth management will still face fee compression. The declines in the underlying costs of investment products (notably index funds and ETFs) have allowed the independent advisors to lower clients’ total fees without decreasing their profits. Nevertheless, over time, that may not be enough, and we are likely to see pressure on advisory fees.

Whether it is robo strategies finding the right way to personalize their offering to better meet client needs or human advisors improving their technology and expanding their scope of services, the old ways of generating large wealth management fees will no longer be sufficient.

David Snider is the Founder & CEO of Harness Wealth, a WealthTech business that guides accomplished individuals to financial opportunity. Previously he was COO & CFO of Compass.

Matt Harris is a managing director at Bain Capital Ventures and is based in New York City. He is consistently ranked as one of the top investors in fintech.